Greece Will Default On Its Debt And Will Eventually Leave The Euro

“Greece Will Default On Its Debt And Will Eventually Leave The Euro” – Paul Krugman

The USA jobs numbers could disappoint..

So another month ticks by and another ‘NFP day’ comes around. For what it’s worth my advice is that, unless you’re already in a trend trade, you should be incredibly wary of taking a new trade involving the USD, before or shortly after the jobs numbers announcement at 1:30 pm (UK time). Whist there’s a small percentage of traders who profit from ‘playing the job numbers’ the vast majority, as born out by historical trading data, will lose money if they attempt to play the NFP figures. However, there is another precedent that’s worth considering, but don’t take my word for it, test it yourself. The overall trend is rarely reversed by the NFP figures..”go figure” as our American cousins would say, actually there’s little figuring that needs to be done..

Circa 42,000 extra courier jobs were added to the payroll numbers in December and the suggestion is that the previous figure in December, alleging that circa 200,000 were added to the NFP figures, was over ambitious and will be revised downwards. Both Reuters and Bloomberg surveys are predicting an addition of 140-150K jobs today, a figure of circa 100K could dent optimism.

While job growth has improved, employment remains about 6.1 million below its pre-recession level. There are no jobs for three out of every four unemployed people and 23.7 million Americans are either out of work or underemployed. Many have chosen to try self employment and many others have simply given up or fallen off the grid and are unaccountable. The USA use various metrics to gauge unemployment, the headline figure that the authorities publish is known as U6 which currently has unemployment at 8.5%, others prefer the U16 measure which suggests circa 15.5-16% is the truer level of unemployment.

The U.S. economy did grow at 2.8 percent annual rate in the final three months of 2011, quickening from 1.8 percent in the third quarter. However, the rebuilding of stocks by businesses accounted for two-thirds of the rise.

China Considers Assisting For The Eurozone Crisis
Investors are also on alert for clues as to possible monetary easing measures to be announced in China after the latest economic data showed the official Purchasing Managers Index for non-manufacturing sectors dipping to 52.9 in January from 56.0 in December. A dip in figures on China’s non-manufacturing sector arrested financial markets’ optimism on Friday ahead of the U.S. jobs data that will determine the strength of the USA’s economic recovery.

China is considering participation in the rescue funds aimed at the European debt crisis, Chinese Premier Wen Jiabao told journalists on Thursday. Wen did not make any explicit financial commitments for the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM).

Wen said;

[quote]China is also considering increasing its participation in the solution of the European debt crisis through the channels of the EFSF and ESM. The Chinese side supports efforts to maintain the stability of the euro and the euro zone. China is investigating and evaluating ways, through the IMF, to be more deeply involved in solving the European debt problem via ESM/EFSF channels.[/quote]

Is the Greece solution good money after bad?

Greece will default on its debt and will eventually leave the euro, Nobel economics laureate Paul Krugman said yesterday during a conference in Moscow.

[quote]The Greek situation is essentially impossible. They will default on their debt. In fact they already have. The question is whether they will also leave the euro, which I think at this point is more likely than not.[/quote]

Greece’s second international bailout may simply open a new boo, in its struggle to remain in the euro area. The rescue plan, which European officials and Greek creditors say may be concluded in coming days, includes losses in excess of 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros now on the table.

German Finance Minister Wolfgang Schaeuble;

[quote]We can’t pay into a bottomless pit. Greece needs a new program, there’s no question about that, but Greece must create the conditions for it.[/quote]

Market Overview
European stocks have advanced for a fourth day as investors await a report that may show the U.S. economy added jobs at a slower pace last month. U.S. index futures were little changed, while Asian shares fell. The Stoxx 600 climbed 0.3 percent to 260.98 at 9:40 a.m. in London after the gauge yesterday rose to its highest level since Aug. 1. The benchmark measure is headed for a 2.2 percent advance this week. Futures contracts on the Standard & Poor’s 500 Index expiring in March rose 0.1 percent today. The MSCI Asia Pacific Index fell 0.1 percent.

Market snapshot at 10:30 am GMT (UK time)

Asian/Pacific markets experienced mixed fortunes during the early morning session, the Nikkei closed down 0.51%, the Hang Seng closed up 0.08% and the CSI closed up 0.8%, the ASX 200 closed down 0.39%. European bourse indices are up moderately in the morning session, the STOXX 50 is up 0.14%, the FTSE is up 0.31%, the CAC is up 0.16% and the DAX is up 0.29%. The SPX equity index future is currently up 0.16%. ICE Brent crude is up $0.23 per barrel whilst Comex gold is up $3.40 an ounce.

Forex Spot-Lite
The euro is headed for a weekly decline versus all of its 16 major peers. It was unchanged from yesterday at $1.315 at 8:00 a.m. in London and is currently printing at 1.317. The yield on Germany’s benchmark 10-year bond fell 2.5 points to 1.82 percent, while the yield on Italian 10-year bonds climbed 0.7 point to 5.567 percent.